India loses at WTO on localisation of solar cells

Geneva: India lost a case today at the WTO against the US concerning domestic content requirements for solar cells and modules in its ongoing national solar mission.

A WTO panel has found that domestic content requirements (DCR) for solar power developers selling electricity to the government-- to use Indian-manufactured cells and modules rather than U.S. or other imported solar technology --under India's National Solar Mission is inconsistent with international trade rules. The panel upheld the US’s claim the DCR is inconsistent with national treatment obligations, specifically, Art III of General Agreement on Tariffs and Trade (GATT) 1994 and Article 2 of the Trade-Related Investment Measures (TRIMs) Agreement. These Articles refer to an agreement that a product, whether domestic or international, should not be discriminated against in terms of the rules that apply and its market access.

Solar Panels. Image Courtesy: Wikimedia Commons/Binu Jayakrishnan

The DCR measures require that certain types of solar cells and modules be made in India.

The US initiated dispute proceedings in February 2013 by submitting a request for consultations with India and for supplementary consultations a year after in February 2014. After the two sides were unable to resolve their differences the matter was referred to Dispute Settlement Body (DSB) in April 2014.

The three panel members for the case were David Walker, (Ambassador of New Zealand to WTO), Pornchai Danvivathana (Thailand), and Marco Tulio Molina Tejeda (Deputy Permanent Representative of Guatemala to WTO).

India had argued that the DCR measures are justified under the general exception category on the grounds that its lack of domestic manufacturing capacity in solar cells and modules, and/or the risk of a disruption in imports, makes these “products in general or local short supply” within the meaning of that provision. The Panel, however, ruled that there was no imminent risk of a short supply and India had failed to demonstrate that the challenged measures are justified under GATT and TRIMS agreement.

India had also argued that hat the DCR measures are justified to secure India's compliance with “laws or regulations” requiring it to take steps to promote sustainable development.

The US Trade Representative Michael Froman announced soon after that the US had won the case against India’s “localization” rules “discriminating” against imported solar cells and modules under India’s National Solar Mission.

“Obama Administration trade enforcement victory is a significant win for the rapid deployment of solar energy across the world and for clean energy jobs here at home,” stated a press release.

"This is an important outcome, not just as it applies to this case, but for the message it sends to other countries considering discriminatory ‘localization’ policies,” Froman said.

“This most recent trade enforcement win comes on that same day that President Obama is to sign the Trade Facilitation and Trade Enforcement Act of 2015, a bipartisan legislative accomplishment that increases the Administration’s enforcement abilities so that the United States can build on our record of standing up for the trade rights of American workers, farmers, and businesses in the global economy,” the press statement added.

The Panel issued its final report to the parties in August 2015 but the public circulation of the report that was originally scheduled for December 2015 was delayed until today on the request of the parties concerned. India has 60 days from now to appeal against the ruling.

The writer is journalist in United Nations Office at Geneva and World Trade Organization